Stablecoins face the same regulations as PayPal or Western Union
A recent proposal from regulators suggests that stablecoins should follow the same policies as traditional versions of payment services that use only fiat currencies, Reuters Reports.
Previously, big companies like Facebook faced a massive wall of regulation once they tried to launch their own stablecoin which could be used for payments within the FB ecosystem.
Security regulators IOSCO and Bank for International Settlements have stated that the rules that currently apply to traditional payment services such as PayPal should apply to stablecoins such as Tether, which is often used as a bridge between cryptocurrency and traditional assets.
The proposal was not discussed by the public before its completion next year. The new policy will likely create the same set of rules that apply to the payment service mentioned above. The rules will mean that the issuing company of the stablecoin must operate as a legal entity.
Stablecoins experienced exponential growth during the pandemic as investors began looking for more ways to diversify their portfolios and enter the rapidly growing industry.
The largest stablecoin in the market, Tether, had a capitalization of $68 billion in 2021 while it had less than half of that amount just a year ago. According to CoinMarketCap, many stablecoins like USD Coin or Paxos have experienced massive growth of billions of units in terms of months.
IOSCO President Ashley Ian Alder is looking forward to creating a regulatory legal framework for cryptocurrencies that will lead to the development of clear and workable guiding standards.
